RDI.L Regulatory News (RDI)

REDEFINE INTERNATIONAL P.L.C.

("Redefine International" or the "Company" or the "Group")

(A UK-REIT incorporated in the Isle of Man)

(Registration number 010534V)

LSE share code: RDI

JSE share code: RPL

ISIN: IM00B8BV8G91

RESULTS FOR THE SIX MONTHS ENDED 29 FEBRUARY 2016

PORTFOLIO REPOSITIONED TO DELIVER RESILIENT INCOME GROWTH

Redefine International, a FTSE 250 income focused UK-REIT, today announces its results for the six months ended 29 February 2016.

Financial Highlights

(1) 29 February 2016 LTV has been adjusted to reflect AUK completion on 1 March 2016 and excludes The Hague. 

· 18.7% increase in earnings available for distribution to £25.4m (28 February 2015: £21.4m)

· Interim dividend of 1.625p per share, an increase of 1.6%

· Portfolio valuation increase of 2.0% like-for-like

· Adjusted NAV per share 40.9p (31 August 2015: 41.7p), a decrease of 1.9% primarily due to the one-off impact of AUK portfolio acquisition costs

· Pro-forma LTV of 52.5% (31 August 2015: 51.8%)

· Reduction in the weighted average cost of debt by 30 bps to 3.6% (31 August 2015: 3.9%)

Operational Highlights

· Completion of transformational AUK portfolio acquisition, increasing the value of the portfolio to £1.5bn and adding £28.6m of annualised gross rental income. A further uplift of £0.5m is now in solicitors' hands

· Successful equity placement, raising gross proceeds of £115.0m

· Valuation growth within the AUK portfolio of £4.6m since acquisition (excluding transaction costs)

· Disposal of 16 Grosvenor Street prior to completion of the AUK portfolio, realising an immediate profit of £2.8m (excluding transaction costs)

· Sale of 10 petrol filling stations for £12.0m, 6.0% above August 2015 book value

· Occupancy improved by 80bps to 98.9% like-for-like

Greg Clarke, Chairman, commented:

"Over the past ten years Redefine International has transformed into an established FTSE 250 UK-REIT with a market capitalisation in excess of £800 million. The focus of the last six months has been on completing the £490 million AUK portfolio acquisition and commencing income enhancing asset management initiatives. This off-market acquisition has brought the value of the Company's assets to in excess of £1.5 billion and is a demonstration of management's ability to source, secure and effectively execute high quality transactions.

I am extremely pleased with the support received from both existing and new shareholders during our capital raise in February to part fund the AUK transaction. Given the prevailing volatile capital markets, this is testament to the progress the business has made in reshaping its portfolio and capital structure."

Mike Watters, Chief Executive, commented:

"With the completion of the second tranche of the AUK transaction on 1 March 2016, we now have a significantly better quality portfolio, underpinned by strong underlying property fundamentals, from which we can, ultimately, produce better quality income. We are confident that our portfolio is now in a robust position from which we can continue to deliver on our commitment to grow income as the property cycle advances.

Further progress has been made in strengthening our balance sheet and reducing the cost of debt. We have improved our weighted average cost of debt by 30bps to 3.6 per cent and, at current market rates, we see scope to reduce it further, while at the same time efficiently decreasing leverage to within our target range of 40 to 50 per cent."

Results presentation

A meeting for analysts and investors will take place today at 9.00a.m. (UK time) at FTI Consulting, 200 Aldersgate, Aldersgate Street, London, EC1A 4HD. The presentation and a live webcast will be available at 9.00a.m. (UK time), 10.00a.m. (SA time) today, which can be accessed via the homepage of the Company's website: www.redefineinternational.com.

Conference call dial-in numbers

United Kingdom Local: +44 (0) 20 3059 8125

South Africa Local: +27 (0) 31 819 7008

Conference password: Redefine

For further information:

Operational & Strategic Review

Our markets

Our portfolio is now almost entirely focused on our core markets of the UK and Germany, Europe's two strongest economies and most liquid real estate markets. The AUK acquisition has improved the quality and income characteristics of our portfolio and has brought greater exposure to areas of economic growth whilst delivering assets with strong underlying property fundamentals. Our exposure to the retail, hotel and commercial sectors is supported by sector specialist asset managers, providing an enhanced ability to allocate and recycle capital into new opportunities to grow income.

The UK economy continues to show positive fundamentals with low unemployment, low inflation, nominal wage growth and stronger retail sales. Notwithstanding this, current sentiment is weak, partly due to uncertainty around the pending EU referendum. Our portfolio and its security of income is well placed to weather either referendum outcome, being relatively insulated, in terms of the location of our assets and occupier exposure, from those sectors potentially most at risk such as financial services or London offices. The economy in the Eurozone continues to recover gradually and we believe our German assets will benefit from continued low interest rates and a pick-up in occupier demand.

We see supportive occupational markets across the majority of sectors in which we operate. Our regionally dominant shopping centres are close to being fully occupied and are largely weighted towards non-discretionary consumer spending. Tenant demand in sectors such as discount, convenience and leisure remains robust. At the majority of our newly acquired retail parks, we have had encouraging occupier demand from national retailers with the total supply of retail space in the UK now at a 14 year low.

Our hotel portfolio, which is largely London focused, continues to benefit from strong demand and a positive outlook for 2016, in spite of the softer start to the year. Average occupancy rates are expected to reach the highest levels for a decade which should more than offset the anticipated increase in supply in 2016 onwards.

In our commercial portfolio, limited availability of grade A space, particularly in regional offices, is supportive of rental values. The distribution sector is currently experiencing a positive structural change, with strong occupier demand and potential for further rental growth.

Portfolio Overview

Our portfolio has been enhanced through active capital recycling and investment in good quality assets with strong property fundamentals that can support sustainable income returns throughout the property cycle. This, combined with our strategic flexibility to invest across sectors, underpins the success of our income focused total return strategy.

The Group's portfolio including our share of joint ventures increased by £4.8 million, £4.6 million being attributable to underlying valuation growth recorded on the AUK portfolio. Early progress on AUK asset management initiatives are expected to provide further valuation uplift.

Our top 10 assets by market value now include five material assets from the AUK transaction, which individually offer opportunities to drive further income and capital growth.

Successful leasing activity during the period delivered an additional £1.6 million of gross annualised rental income and £2.1 million of net operating income, despite planned development work having some impact on new lettings and renewals at Weston Favell, Northampton. Following confirmation from Northern Foods that it would exercise its break clause as expected, we are in the final stages of negotiations with a replacement tenant in Crawley at the Camino Park Distribution Centre, which has seen strong demand from the market.

Key leasing activity completed during the period:

· Delta 900, Swindon - new 15 year lease with Oxford Brookes University for 2,640 sqm (28,412 sqft) on an agreed rent of £0.3 million, 20.8 per cent above ERV.

· Banbury Cross Retail Park - new 10 year lease for 460 sqm (4,998 sqft) with Tapi, the carpet and flooring supplier, on an agreed rent of £0.1 million which was in line with ERV. A lease renewal was also agreed with Poundstretcher at a rent of £0.2 million, 2.8 per cent ahead of ERV.

· Queens Drive, Kilmarnock - new 10 year lease for 1,390 sqm (15,000 sqft) with Smyths Toys on an agreed rent of £0.2 million which was in line with ERV. The retail park is now fully occupied.

· Lochside View, Edinburgh - new 10 year lease for 1,040 sqm (11,202 sqft) with Origa on an agreed rent of £0.2 million, ahead of ERV.

· Kingsthorne Industrial Park, Kettering - new 10 year lease for 1,183 sqm (12,737 sqft) with Rexson for an agreed rent of £0.1 million, in line with ERV and 17.9 per cent ahead of passing rent.

· Charing Cross Road, London - two rent reviews with Superdrug for 460 sqm (4,953 sqft) and Three Monkeys for 700 sqm (7,571 sqft), were agreed totalling £0.8 million, £0.2 million above passing rent.

Resilient and secure income stream

We remain confident in our ability to deliver on our income commitments. Our above industry average WAULT of 8.1 years, for our core portfolio, gives clear visibility on our future rental income and combined with our diverse and high quality tenant base, this provides a resilient and secure income stream. In addition, less than 30 per cent of gross rental income is subject to break options or expiries in the next five years with no more than 10 per cent expiring in any single year.

Following the AUK transaction, our portfolio has a larger weighting towards economic growth areas. Although occupancy is high at 98.0 per cent, opportunities remain to reduce voids, particularly in the AUK regional offices. We are increasing our lettable area in our shopping centres by utilising previously unused space with commercialisation initiatives, selective reconfiguration and expansion opportunities. Over 30 per cent of our total portfolio is subject to indexed or fixed rental increases, mainly in the UK Commercial and European portfolios.

Acquisitions

In March 2016 we concluded the AUK portfolio acquisition. This deal was secured off-market, a considerable achievement in an environment which is highly competitive for such institutional quality assets. Our portfolio has now increased by approximately 50 per cent to £1.5 billion, adding a significant, resilient and long term rental stream with clearly identified additional income opportunities to realise.

The acquisition enhances the overall quality of the portfolio, providing exposure to high quality assets in locations supported by strong occupier demand that are capable of producing long term sustainable income returns throughout the property cycle.

Transformational AUK Acquisition

Progress to date on the AUK portfolio asset management initiatives has exceeded management's expectations, with discussions and agreements ahead of the business plans for each property. The initial yield on acquisition was 5.0 per cent as previously reported, will increase to a topped-up yield of 5.6 per cent following the early sale of 16 Grosvenor Street, successful letting activity and the run off of rent free periods.

We remain confident in our ability to successfully execute the asset management opportunities we have identified. A further eight leases covering 45,035 sqm (484,760 sqft) in the AUK portfolio are currently in solicitors' hands, with almost all expected to be signed with high quality national tenants for terms of at least 10 years. Following the completion of these leases an additional £0.5 million of annualised gross operating income will be generated and the retail parks and distribution portfolios will be fully occupied. We are now presented with the welcome challenge of creating additional space in our portfolio to meet occupier demand. There are ongoing discussions on the majority of the remaining 4,087 sqm (43,990 sqft) of vacant regional office space.

Key lease agreements currently in solicitors' hands and expected to complete shortly:

· Banbury Cross Retail Park - three lease renewals for 3,160 sqm (34,018 sqft) and gross rent of £0.6 million, on average 11.4 per cent higher than ERV.

· Queens Drive, Kilmarnock - the retail park is now fully occupied with two additional pre-let units to be built (subject to planning) to meet occupier demand.

· Omnibus, Reigate - 1,022 sqm (11,000 sqft) of the remaining 2,553 sqm (27,483 sqft) at an agreed rent above ERV.

· Camino Park, Crawley - a new lease agreement for 2,537 sqm (27,306 sqft) at a gross rent of £0.3 million, 12.7 per cent above ERV. In addition, a lease renewal to Royal Mail for 20,534 sqm (221,037 sqft) on a five year term. Combined, the two leasing transactions are expected to add an additional £0.4 million of net rental income.

· Express Park, Bridgewater - five year lease extension of a 12,407 sqm (133,550 sqft) unit at passing rent. Combined with the Camino Park agreements this will increase the WAULT on our distribution portfolio by over 40 per cent to 6.6 years.

The portfolio value (excluding the impact of acquisition costs of £22.6 million) has increased by £4.6 million above the purchase price, in addition to the Group's share of realised profit of £2.8 million on disposal of 16 Grosvenor Street, with further value-adding asset management opportunities still to be completed.

Disposals

A portfolio of ten petrol filling stations was sold during the period for £12.0 million, reflecting a 6.0 per cent premium to the year-end book value. The Group's remaining petrol filling station portfolio is let to BP with an average lease length of 16.7 years and subject to fixed five yearly rental uplifts.

16 Grosvenor Street, which formed part of the second tranche of the AUK portfolio, was sold prior to the transaction's completion for £35.6 million, 22.8 per cent above the purchase price of £29.0 million.

Unlocking further value through selective high yielding development

Primark, Ingolstadt

The 5,200 sqm (56,000 sqft) redevelopment of a unit pre-let to Primark is on target to complete in late 2016. The existing H&M unit is being reconfigured but continues to trade through the development period. The introduction of Primark will significantly strengthen the retail offering in the town and surrounding areas, and encourage additional footfall. Once complete, the Primark lease will deliver an additional €1.5 million of rental income per annum.

Weston Favell, Northampton

Following the acquisition of Weston Favell in December 2013, a phased redevelopment plan has been initiated to modernise the centre. The first phase of the upgrade works commenced in January 2015 and is largely complete.

The development budget of £4.6 million allocated to the first phase primarily covers the reconfiguration of the ground floor space and rebranding of the centre. These refurbishment and upgrade works are the first steps in enhancing the tenant profile which is expected to result in increased footfall and rental appreciation.

UK Retail

The ongoing positive consumer environment is expected to support stable or improving sales for retailers in 2016 although margins may be challenged following changes to the minimum wage and a business rates review. While the investment market for good quality retail schemes remains active, a large number of shopping centres have been marketed since the middle of 2015 resulting in a significant increase in investment supply which will need to be absorbed.

Our UK shopping centres are close to full occupancy and we have seen restored confidence from national operators willing to take additional space or renew leases. This increased demand, despite retailers remaining highly cost sensitive, demonstrates clear signs of improvement in the sector. For the year ahead we see opportunities around modest rental growth, reconfiguration and optimisation of space, further development and expansion activities as well as a drive on income from advertising and promotional space.

Our newly acquired retail parks are fully occupied with strong tenant demand creating opportunities to add additional space or bring in new retailers to improve footfall and trading.

The UK Retail portfolio decreased in value by £5.0 million or 1.4 per cent on a like-for-like basis. The change in value reflected an outward yield shift of 20 bps and a like-for-like net rental income increase of 2.3 per cent.

UK Hotels

The UK Hotels portfolio has experienced another solid trading period. The outlook for limited service branded hotels remains supportive of further income growth, with average occupancy rates for London hotels expected to reach 84 per cent in 2016, the highest levels for a decade. Average daily rates in London are forecast to increase 2.2 per cent per annum.

The Company's 25.3 per cent stake in RedefineBDL, the largest independent hotel management company in the UK, produced distributable earnings of £1.2 million during the period.

Underlying trading results in the RedefineBDL managed portfolio remain robust with EBITDA figures for the period marginally ahead of management forecasts and 6.1 per cent up on the comparative period last year. There have been strong performances by the Crowne Plaza, Reading and DoubleTree by Hilton in Edinburgh. Our UK Hotels portfolio reduced in value by £0.6 million or 0.3 per cent on a like-for-like basis.

The Company's 14.4 per cent investment in International Hotel Group Limited ("IHGL") had a market value of £7.9 million at period end, a 14.5 per cent increase on our investment. A further investment of £1.5 million was made post period end to provide additional seed capital in support of identified investment opportunities. Our investment strategy in respect of IHGL is to support the establishment of a focused hotel investment company with a wide investment remit that can leverage the RedefineBDL management platform. We expect our shareholding to be diluted with further acquisition led growth in IHGL.

UK Commercial

Occupational markets have seen strong take-up combined with rental growth. This has been particularly evident in the distribution sector with online retailing and parcel delivery resulting in a 46 per cent increase in the first two months of 2016. Take-up in the office market remained strong across London, the South East and the key regional cities. Although careful asset selection in regional centres remains an important consideration, demand is less widespread.

Investment activity across most commercial sectors has slowed ahead of the EU referendum, however this is off a high base and investment levels are still above long term averages.

Leasing activity and rent reviews, particularly within the AUK portfolio, have been encouraging. Two recent rent reviews at Charing Cross Road, London, which benefits from its proximity to Crossrail, were agreed at more than 29 per cent above passing rents. The four regional offices acquired as part of the AUK portfolio had over 6,500 sqm (19.9 per cent) of vacant space on acquisition in October 2015 between them. Since then, 1,040 sqm has been let in Lochside View, Edinburgh at two per cent above ERV. A further 1,022 sqm is currently in solicitors' hands and we continue to make good progress on the remainder of the vacant regional office space.

The UK Commercial portfolio increased in value by £6.9 million or 4.6 per cent on a like-for-like basis. The increase in value was supported by an inward yield shift of 26 bps points and a like-for-like net rental income increase of 0.3 per cent.

Europe

The German investment market has experienced high levels of activity, particularly in retail, where €19.4 billion was invested in 2015. As is currently being experienced in the UK, the recent uplift in values is likely to place increased emphasis on income returns and rental growth potential. Interest rates remain at historic lows and look likely to remain at these rates for an extended period of time.

The German economic recovery is expected to continue in 2016, albeit slowly. Growth is forecast to exceed that of the Eurozone supported by improving employment figures and rising incomes.

Occupancy, excluding space under development, remains high at 98.2 per cent (August 2015: 98.2 per cent). The new 5,200 sqm development at Ingolstadt is currently vacant but subject to a €1.5 million pre-let agreement with Primark.

The European portfolio increased in value by £19.8 million or 6.6 per cent on a like-for-like basis. In local currency terms the portfolio valuation declined by 0.4 per cent reflecting a small decline in local currency net rental income.

Outlook

Redefine International has had a positive and extremely active start to the year. The AUK acquisition places the Company in a stronger positon and our enlarged portfolio is fully aligned with the Group's strategy of allocating capital to assets with income and capital growth potential. We will continue to enhance the portfolio through value creation initiatives which are focused on increasing income, together with active recycling of capital from underperforming and more mature assets into new opportunities. With the disposal of non-core assets our portfolio is streamlined and has a clear focus on Europe's two strongest economies.

We remain confident in our ability to deliver a resilient and secure income stream, despite the current economic and political uncertainty surrounding the EU referendum in the UK. Our portfolio, diversified by both sector and geography, has limited exposure to the financial services sector and is therefore likely to be relatively insulated from any potential referendum outcome.

It is likely that a low interest rate environment will prevail in the medium term and we plan to capitalise on this opportunity whilst at the same time deleveraging our balance sheet to within our target LTV range of 40 to 50 per cent.

We believe an income driven total returns strategy is the right long term growth strategy for the Company, particularly at this point in the property cycle, as sustainable cash-based rental returns are fundamental to long term total return performance and growth in capital values.

Our target of growing the dividend ahead of inflation remains a clear focus. As we take a more active approach to capital recycling and leverage reduction, it is necessary at this point in the property cycle to set medium term objectives to ensure we maintain sufficient flexibility to align dividends with recurring earnings. The Group will target dividend growth of CPI plus one to two per cent across the medium term.

Financial Review

Overview

The first half of 2016 has been characterised by the transformational AUK portfolio acquisition. The first tranche completed in September and October 2015, with the second tranche completing on 1 March, immediately after the period end. Following the AUK acquisition the Group's property portfolio is now valued in excess of £1.5 billion.

In February 2016, to support the funding of tranche two, the Group completed a £115.0 million equity raise, placing 270.6 million ordinary shares at a placing price of 42.5 pence per share. This was a particularly pleasing result in light of the prevailing market backdrop.

Also in February, the Group disposed of ten petrol filling stations from its Malthurst portfolio for consideration of £12.0 million. Associated debt of £6.5 million was prepaid at a cost of £0.2 million. At the point of disposal, the filling stations had been generating annual rent of £0.9 million.

Pro-forma LTV remains broadly unchanged since year-end, however, our weighted average cost of debt continues to improve as we take advantage of the ongoing favourable interest rate environment.

The Group seeks to use cash wisely and limit the impact of any cash drag on earnings. The timing of the February placement and the immediate deployment of proceeds has ensured the cash drag which impacted the second half of 2015 has not reoccurred in 2016. With a conservative level of capital commitments, careful liquidity planning and the newly secured AUK facility (which includes a revolving credit facility) the Group is able to balance the efficient use of cash with the need to maintain a degree of financial flexibility.

The first half of the year saw a strengthening of the euro relative to sterling of some 6.6 per cent, reversing a significant proportion of the decline experienced in 2015.

AUK portfolio acquisition

The AUK portfolio comprised of 20 properties at an initial market value of £489.9 million.

On 7 September 2015 the Group completed on the acquisition of the first of these properties, Banbury Cross Retail Park in Oxfordshire, at a purchase price of £52.5 million and conditionally exchanged contracts for the acquisition of the remaining 19 properties. Banbury Cross Retail Park was funded entirely from existing cash resources and generates a gross annual income of £3.8 million.

Due to the nature and size of the transaction, shareholder approval was sought for the acquisition of the remaining properties. Shareholders approved the transaction at an Extraordinary General Meeting ("EGM") on 25 September 2015, at which point the contract became unconditional and the significant risks and rewards of ownership transferred.

As agreed with the vendor, the remaining properties were scheduled to complete in two tranches, the first of which comprising nine properties, completed on 2 October 2015 at a purchase price of £203.5 million. This was funded by both existing cash resources and £155.0 million drawn against a new £303.0 million facility which had been secured with a syndicate of four UK banks. An initial margin of 2.1 per cent was payable. This is comprised of a £155.0 million term facility a £148.0 million revolving credit facility. The nine properties acquired on this date generate gross annual income of £13.5 million.

On 21 December 2015, the Group announced it had exchanged contracts to sell one of the remaining ten properties it was due to acquire as part of the second tranche, 16 Grosvenor Street, Mayfair. The property was sold for £35.6 million realising an immediate profit for the Group of £2.8 million (including costs).

On 1 March 2016 the last nine properties were acquired at a purchase price of £204.7 million. The properties were funded by the proceeds of the February 2016 equity raise and the drawing of £97.0 million of the £148.0 million revolving credit facility referred to above. Following the completion of tranche two, the margin payable on the combined AUK facility reduced to 1.9 per cent.

Including costs, predominantly stamp duty land tax, the AUK portfolio was acquired for £483.4 million and is valued at £465.4 million at 29 February 2016. Acquisition costs of £22.6 million amounted to 4.9 per cent of the purchase price paid.

The second tranche of the acquisition completed on 1 March 2016 (post period end). The entire portfolio has been reflected on the Group's balance sheet at 29 February 2016 with the resultant payable due, as the significant risks and rewards of ownership had transferred in September 2015. This is in line with the Group's accounting policy. For this reason, the Group again presents a pro-forma calculation of LTV to illustrate the position as though the transaction had completed on 29 February 2016.

Basis of presentation

Internally the Board focuses on and reviews information and reports prepared on a proportionately consolidated basis, which includes the Group's share of joint ventures. To align with the way the Group is managed, this financial review presents the performance and position of the Group on that basis.

Income statement

In addition to EPRA earnings, the Group presents an underlying calculation of earnings. The Directors consider that this presentation provides useful information as it removes certain exceptional items and fair value changes and better reflects the underlying performance of the business.

EPRA earnings decreased by 4.5 per cent to £23.1 million or 1.5 pence per share (28 February 2015: 1.8 pence) primarily as a result of the gain recorded on extinguishment of debt in the prior period. Underlying earnings increased 5.6 per cent to £22.6 million, a £1.2 million increase relative to the comparative period. The inclusion of a non-recurring profit on disposal of 16 Grosvenor Street, Mayfair of £2.8 million contributed to an 18.7 per cent increase in distributable earnings when compared to the first half of 2015. The inclusion of this opportunistic profit (which was realised pre-completion) goes some way towards normalising distributable earnings during the period for the impact of the phased completion of the AUK portfolio.

Following the disposal of the Group's investment in an Australian listed security ("Cromwell") and the subsequent recycling of capital into the first tranche of the AUK portfolio acquisition, gross rental income has increased by £7.0 million with a reduction in investment income from Cromwell of £3.7 million.

As illustrated below, on a like-for-like basis, gross rental income fell by 0.8 per cent when compared to the first half of 2015. The 4.6 per cent fall in like-for-like income in Europe was the result of the average euro rate applied to income generated in the first half of 2016 being weaker than that applied in the first half of 2015.

Property operating expenses and administrative costs remain in line with the first half of 2015. On a full year basis we would expect these costs to increase marginally alongside the expansion in the Group's activities.

Although the weighted average cost of debt has reduced, net finance costs have remained in line with the prior period due to the higher average level of net debt, primarily following the completion of the first tranche of the AUK acquisition.

A fair value loss of £17.8 million was incurred on the Group's property portfolio. The loss is the result of underlying valuation gains of £4.8 million being offset by £22.6 million relating to acquisition costs on the entire AUK portfolio. Capex during the period amounted to £4.2 million. This was invested in UK Retail (£1.9 million), mainly at Weston Favell, UK Hotels (£1.3 million), primarily extending the Travelodge at Enfield, and in Europe (£1.0 million), largely at Ingolstadt.

Gains on disposal of investment property of £3.4 million arose following the sale of ten petrol filling stations in February 2016 and an early opportunity to realise value from within the AUK portfolio in December 2015 when 16 Grosvenor Street was sold post exchange but pre-completion.

During the period the Group cumulatively invested £6.9 million in International Hotel Group Limited, a hotel and leisure focused property investment company. A fair value gain of £1.0 million was recognised at period end. At 29 February 2016 the Group's investment represented 14.4 per cent of the company's issued share capital.

As a UK Real Estate Investment Trust ("REIT"), the Group pays tax directly on its European earnings and any UK non-property residual income under REIT rules along with withholding taxes and, where applicable, capital gains taxes. During the period to 29 February 2016, a net current tax credit of £0.7 million arose as a result of an over-provision of £1.1 million on the capital gains tax due on disposal of the Group's Swiss portfolio in 2015. This was offset by underlying taxes charged on foreign earnings and non-qualifying UK income of £0.4 million.

Balance sheet

EPRA adjusted, diluted net assets per share ("EPRA NAV") decreased by 1.7 per cent to 40.3 pence (31 August 2015: 41.0 pence). Adjusting for the result of non-recourse negative equity, adjusted NAV of 40.9 pence decreased by 0.8 pence or 1.9 per cent since year-end. The underlying valuation growth of £4.8 million in the property portfolio was offset by the £22.6 million of acquisition costs incurred on the AUK transaction which resulted in a net valuation loss of £17.8 million (representing 1.0 pence per share). This loss is offset by currency translation gains recorded on the Group's net investment in Europe (representing 0.2 pence per share).

In February 2016, the Group completed the placing of 270.6 million ordinary shares at a placing price of 42.5 pence per share (a 1.9 per cent premium to the 31 August 2015 net asset value) raising gross proceeds of £115.0 million. Placing costs totalling £5.9 million included £2.5 million paid to Redefine Properties Limited, the Company's largest shareholder, for underwriting £70.0 million of the equity raise. Redefine Properties Limited subscribed for £34.6 million of the gross equity raised, maintaining its proportional 30.07 per cent shareholding.

The capital raise generated net proceeds of £109.1 million and completed on 23 February 2016.

(1) As a result of the non-recourse nature of the debt relating to the Justice Centre in The Hague, Netherlands, a negative equity position of 0.6 pence per share has been adjusted for to arrive at an Adjusted NAV measure

Investment Property

On a like-for-like basis the UK portfolio experienced little valuation growth in the first half of 2016 due to the headwinds experienced in the retail investment market offsetting the more resilient commercial property sector. UK Retail has underperformed other real estate sectors since the start of 2015 with IPD suggesting capital growth of just one per cent being achieved in the last calendar quarter of 2015, falling to nil in February 2016.

The November 2015 terrorist atrocities in Paris impacted UK Hotels with a softening in occupancy from late November, which continued into January 2016. The resilience of the UK market has seen occupancy return to normalised levels during February 2016.

European valuations also experienced little growth in underlying currency terms, but with a strengthening in the euro there has been a significant reversal of 2015 losses in sterling terms.

(1) Valuation includes the effect of capital expenditure, amortisation of head leases, lease incentives and foreign currency translation where applicable.

Debt and Gearing

Adjusting for the completion of the second tranche of the AUK acquisition and The Hague, balance sheet leverage at 29 February 2016 would have been 52.5 per cent (31 August 2015: 51.8 per cent).

Following the sale of the investment in Cromwell and the Swiss property portfolio in September 2015, the Group repaid its AUD 50 million Australian facility and its CHF 16 million Swiss facility. These facilities had attracted interest rates of 7.3 per cent and 2.0 per cent respectively. Break costs incurred totalled £0.6 million.

In February 2016, following the sale of ten petrol filling stations, £6.5 million was prepaid against the Malthurst facility. This facility attracts interest at 4.2 per cent and break costs of £0.2 million were incurred.

The Group utilises derivative instruments, including interest rate swaps and interest rate caps, to manage its interest rate exposure. At 29 February 2016, the net fair value liability of the Group's share of derivative financial instruments was £3.9 million (31 August 2015: £4.5m).

Redefine International has a hedging policy which requires at least 75 per cent of all interest rate exposures exceeding one year to be on a fixed or capped rate basis. For facilities with interest rate swaps or caps attached, the interest rates are fixed or capped for the duration of the facility. The changes in the fair value of the Group's hedging instruments have been recognised in the income statement.

(1) Adjusted to incorporate the completion of the second tranche of the AUK portfolio acquisition on 1 March 2016 and exclude The Hague.

Cash flow

Cash flow from operating activities increased £0.7 million to £16.8 million for the period, largely due to the increase in rental income.

During the period, £157.4 million was applied towards investing activities. This was primarily the result of the acquisition of tranche one of the AUK Portfolio, including Banbury Cross (£272.1 million), offset by proceeds received from the sale of Cromwell, the Swiss assets, ten petrol filling stations and other non-current assets held for sale (£114.6 million).

Financing activities generating £200.4 million were mainly the result of the equity placement (net proceeds of £110.2 million) and borrowings drawn to finance the first tranche of the AUK acquisition (£155.0 million). These were offset by debt repayments and prepayments (£44.4 million) and cash dividends paid (£13.2 million).

Following the equity placement, cash on hand at 29 February 2016 was £155.1 million. Upon completion of the second tranche of the AUK acquisition on 1 March 2016, cash on hand fell to £42.8 million.

Principal risks and uncertainties

The Directors have concluded that there has been no significant change in the principal risks and uncertainties faced by the Group, neither is there anticipated to be a significant change during the remaining six months to 31 August 2016. Full disclosure of risks and uncertainties faced are set out in the 2015 Annual Report.

Dividends

The Directors have declared an interim dividend for the period of 1.625 pence per share. This reflects an increase of 1.6 per cent on the first interim dividend paid in respect of 2015 and an annualised yield of 8.1 per cent based on EPRA NAV, 7.6 per cent when compared to the Group's share price at 29 February 2016.

The Company proposes offering shareholders the option of receiving a cash dividend or a scrip dividend by way of an issue of new Redefine International P.L.C shares. The details of the tax components of the dividend and the timetable have been announced separately today. The dividend payment date is set for 6 June 2016 to shareholders on the register at 20 May 2016.

In respect of the second interim dividend for the year ended 31 August 2015 which was paid to shareholders in December 2015, the scrip take up of 47 per cent resulted in a cash saving of £11.2 million.

D Grant

26 April 2016

Directors' Responsibilities

Statement of Directors' responsibilities

The Directors are responsible for preparing the condensed consolidated interim financial statements, in accordance with applicable laws and regulations.

The Directors confirm that to the best of their knowledge:

- the condensed consolidated interim financial statements have been prepared in accordance with IAS 34 'Interim Financial Reporting';

- the condensed consolidated interim financial statements include a true and fair view of the information required by Sections DTR 4.2.7R and DTR 4.2.8R of the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

The operating and financial review refers to important events which have taken place during the period.

Related party transactions are set out in note 24 to the condensed consolidated interim financial statements.

By order of the Board

Mike Watters Donald Grant

Chief Executive Chief Financial Officer

26 April 2016

Independent review report to Redefine International P.L.C.

Introduction

We have been engaged by Redefine International P.L.C. ("the Company") to review the condensed set of consolidated financial statements in the half-yearly financial report for the six months ended 29 February 2016 which comprise the condensed consolidated income statement, the condensed consolidated statement of comprehensive income, the condensed consolidated balance sheet, the condensed consolidated statement of changes in equity, the condensed consolidated statement of cash flows and the related explanatory notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the set of consolidated financial statements.

This report is made solely to the Company in accordance with the terms of our engagement to assist the Company in meeting the requirements of the Disclosure and Transparency Rules ("the DTR") of the UK's Financial Conduct Authority ("the UK FCA"). Our review has been undertaken so that we might state to the Company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company for our review work, for this report, or for the conclusions we have reached.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half-yearly financial report in accordance with the DTR of the UK FCA.

As disclosed in Note 2, the annual financial statements of the Group are prepared in accordance with IFRSs as issued by IASB. The directors are responsible for ensuring that the set of financial statements included in this half-yearly financial report have been prepared in accordance with IAS 34 Interim Financial Reporting as issued by IASB.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of consolidated financial statements in the half-yearly financial report based on our review.

Scope of review

We conducted our review in accordance with the Financial Reporting Council's International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.

A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of consolidated financial statements in the half-yearly report for the six months ended 29 February 2016 is not prepared, in all material respects, in accordance with IAS 34 Interim Financial Reporting as issued by IASB and the DTR of the UK FCA.

N Marshall

For and on behalf of KPMG

Chartered Accountants

1 Harbourmaster Place

IFSC

Dublin 1

Ireland

26 April 2016

Condensed Consolidated Income Statement

for the six months ended 29 February 2016

The accompanying notes form an integral part of these condensed consolidated interim financial statements.

(1) Comparative information has been re-presented to ensure consistency with the current period. There has been no restatement of information reported, with changes in presentation only.

Condensed Consolidated Statement of Comprehensive Income

for the six months ended 29 February 2016

The accompanying notes form an integral part of these condensed consolidated interim financial statements.

Condensed Consolidated BALANCE Sheet

as at 29 February 2016

The accompanying notes form an integral part of these condensed consolidated interim financial statements.

The condensed consolidated interim financial statements were approved by the Board of Directors on 26 April 2016 and were signed on its behalf by:

Mike Watters Donald Grant

Chief Executive Chief Financial Officer

Condensed Consolidated Statement of Changes In Equity

for the six months ended 29 February 2016